How salary tax works in Nepal

How is salary tax calculated in Nepal?

Salary tax is calculated on the fiscal year as a whole, in five steps: add all employment income, add your employer's retirement contribution, subtract the reliefs you qualify for, apply the tax bands to what is left, then subtract any rebate. Your employer withholds a share of that every month as TDS.

1. Assessable income — salary, allowances, festival bonus, overtime, plus the employer's PF/SSF contribution.
2. Less relief — retirement contributions, CIT, life and health insurance premiums, each against its own ceiling.
3. Taxable income — what the bands run on.
4. Band tax — each band taxes only the slice of income inside it. Nothing is taxed twice.
5. Less rebate — 10% off the computed tax for a resident woman with only employment income.

What counts as your income for tax?

Every cash payment from your employment counts: basic salary, grade, dearness and other allowances, overtime, the festival bonus, gratuity paid during the year, and your employer's contribution to your PF or SSF. Tax is on gross employment income, never on basic salary alone.

The employer contribution is the line most people miss. It never lands in your bank account, so it feels invisible — but the Income Tax Act treats it as a benefit you received, adds it to your income, and then allows it back as retirement relief. Below the ceiling the two cancel out exactly. Above the ceiling they do not, which is why very high salaries pay tax on money they never touched.

Which deductions can a salaried person claim?

Four reliefs cover almost every salaried person: retirement contributions (PF or SSF, yours and your employer's), the Citizen Investment Trust, a life insurance premium up to NPR 40,000, and a health insurance premium up to NPR 20,000. PF/SSF and CIT share one combined ceiling of NPR 5,00,000 a year.

The stacking rule on CIT is where money quietly disappears. CIT only gets the room left inside the NPR 5,00,000 ceiling after your mandatory fund contribution has taken its share. On a large salary with SSF that room is often zero — the deposit is still your savings, but it buys no tax relief this year.

What is the 1% Social Security Tax, and who does not pay it?

The first band of the schedule is a 1% Social Security Tax rather than income tax. Contributors to the Social Security Fund do not pay it — their SSF contribution already discharges that obligation. Provident Fund members are not exempt: PF is a retirement fund, not the SSF.

For FY 2083/84 that band covers the first NPR 10,00,000 of taxable income, so the waiver is worth up to NPR 10,000 a year to an SSF member — on top of the relief the contribution itself earns.

SSF vs PF vs CIT: what is the difference?

PF and SSF are workplace retirement funds your employer runs — you are normally in one or the other, not both. CIT is a voluntary scheme you join yourself. All three earn tax relief, but only SSF waives the 1% Social Security Tax, and only SSF pays medical, accident and maternity benefits.

For most employees the choice is not really theirs: whichever scheme the employer runs is the scheme you are in. Where you do have a say is CIT — and the honest test is whether the combined ceiling still has room. The calculator prices that room before you deposit anything.

What are the FY 2083/84 tax slabs?

FY 2083/84 uses one schedule for everyone: 1% on the first NPR 10,00,000, 10% from NPR 10,00,001 to 15,00,000, 20% to 25,00,000, 27% to 40,00,000 and 29% above that. The separate married-couple schedule was merged away and the top rate fell from 39% to 29%.

Rates are marginal. Crossing a threshold never reduces your take-home — only the rupees above it carry the higher rate. The full tables for FY 2082/83 and 2081/82 are on the slabs page, including the old single and couple schedules.

How much tax on a NPR 1,00,000 salary?

An SSF member earning NPR 1,00,000 a month, with basic at 60% of gross, pays NPR 1,007 a month under FY 2083/84 rules and takes home NPR 92,393. The retirement contribution does most of the work: it is relieved, and it waives the 1% band.

These figures come from the same engine that powers the calculator, so they cannot drift from the tool. Change the fund, the months worked, or add insurance relief and the numbers move — which is exactly what the calculator is for.

Who gets a rebate or a bigger exemption?

A resident woman whose only income is employment income in Nepal gets a 10% rebate on the tax computed — applied at the end, to the tax, not to income. Postings in remote areas, pensions in payment and registered disabilities carry additional relief under the Act, in amounts the Finance Act sets each year.

The women's rebate is the one this calculator applies automatically when you select Female. The others depend on documents your payroll team has to hold on file — a remote-area posting letter, a pension record, a disability card — so they are worth raising with HR rather than assuming.

Why does my monthly TDS keep changing?

Because withholding is an estimate that keeps being corrected. Payroll withholds against what it knows that month — a mid-year raise, a bonus, or relief you declared late all change the year's expected tax, and the remaining months absorb the difference. The annual figure is what matters.

• A bonus month looks heavy because the bonus lands entirely in your top band.
• After a raise, the months left carry the catch up for the months already paid.
• After declaring insurance, TDS drops sharply for a month or two as the year's relief spreads over fewer payslips.
• A cumulative method — used by many payroll systems, including NepalHRM — recalculates the whole year every month, so the figure moves even when nothing about you changed.

How to check your own payslip in five minutes

Work the year, not the month: add your annual pay and the employer's fund contribution, subtract your reliefs, run the remainder through the bands, then compare the annual tax with the TDS line on your payslips. A gap in one month is normal; a gap across the year is worth a question.

1. 1

   Add up the year, not the month

   Take your monthly gross, multiply by the months you will be paid this fiscal year, then add the festival bonus and any other cash allowance. Tax is assessed on the year.

2. 2

   Add your employer's fund contribution

   Find the employer PF or SSF line on the payslip and add the annual figure. It never reaches your account, but the Act treats it as income you received.

3. 3

   Subtract the relief you are entitled to

   Your own fund contribution plus the employer's, capped at NPR 5,00,000 combined with CIT, then life insurance up to NPR 40,000 and health insurance up to NPR 20,000.

4. 4

   Run what is left through the bands

   For FY 2083/84: 1% on the first NPR 10,00,000, 10% to NPR 15,00,000, 20% to NPR 25,00,000, 27% to NPR 40,00,000, 29% above. SSF members skip the 1% band.

5. 5

   Compare the annual figure, not the monthly one

   Divide the annual tax by the months remaining and compare it with the TDS line on your payslip. A gap in one month is normal; a gap across the year is worth asking HR about.

Five mistakes that cost salaried Nepalis money

The expensive mistakes are administrative, not mathematical: never declaring insurance premiums, topping up CIT with no ceiling room left, comparing job offers on gross, assuming a bonus is tax-free, and ignoring a mid-year change until Ashad.

1. Not declaring insurance premiums. NPR 60,000 of relief goes unused because nobody sent HR the policy. At a 20% band that is NPR 12,000 of tax, every year.
2. Topping up CIT with no room. Check the combined ceiling first — the money stays yours, but the tax saving can be zero.
3. Comparing offers on gross. A 20% employer SSF contribution is real money in your name. Use the offer comparison.
4. Treating the festival bonus as tax-free. It is employment income, taxed at your highest band in the year it is paid.
5. Waiting until Ashad. Relief declared in the last month still counts, but a whole year's correction then lands in one payslip.

Tax year, deadlines and what you must file

Nepal's fiscal year runs from Shrawan 1 to the end of Ashad — roughly mid-July to mid-July. Your employer withholds tax monthly and reports it to the Inland Revenue Department. If employment with a single employer is your only income, that withholding is generally final and no separate return is needed.

Anyone with income beyond that single employment — rent, consulting, a second job, or foreign income — is in a different position, and higher earners have their own filing obligations. That is an accountant's question, not a calculator's; this page deliberately stops at the salary.

Frequently asked questions

More questions — including why your TDS differs from this tool, and whether the calculator stores anything — are answered on the FAQ page.

Sources and how this page is kept current

The rules here come from the Income Tax Act 2058 and the Finance Act for the selected year, cross-checked against the payroll engine NepalHRM runs for Nepali employers. This page was last reviewed on 3 August 2026.

• Inland Revenue Department, Nepal

  The primary authority for income tax rates, TDS obligations and filing.

• Income Tax Act 2058 (2002)

  The statute behind assessable income, the §63 reliefs and the retirement contribution ceiling.

• Social Security Fund

  Contribution rates, benefits and employer registration for the SSF.

• Citizen Investment Trust

  The CIT scheme itself: how to join and what the contribution buys.